Patents and Innovation Economics

There are zillions of stories complaining about how some innocent multinational company is being sued for patent infringement by some evil company that does not even make a product. However, you never hear of the story of the start-up company that has filed for a patent, gotten the run around by the Patent Office and could not raise funding because their patent has not issued. Well here is one of these stories, which are much more numerous than the supposed lawsuit problem.

This company was founded in 2003 by a cardiothoracic surgeon and two engineers. Their invention is a product and service that could save the U.S. as much as a $1 Billion a year in heart related procedures. The inventors filed a patent in 2004 probably spending as much as $10K of their limited capital. They then performed various experiments including arranging animal trials with a major veterinarian university. The animal trials were overwhelming successful and most cardiothoracics surgeon would have thought their results impossible. In 2007, the company filed a continuation-in-part to incorporate their new information. The company waited two years for the patent office to finally examine their patent application. The patent office’s rejection showed that they did not understand the basic concept behind the invention. Despite numerous interviews with the examiner and the supervisor, they continued to cite even more outrageous prior art references that taught away from the company’s invention or were just plain irrelevant. A key insight of the invention is that it did not cauterize or damage the tissue near a puncture. Every other reference showed this feature. The patent office provided absurd definitions for words in order to reject the claims. For instance, they suggested the word “punch” meant rotation.

The company raised these issues with the examiner, the examiner’s supervisor, and the head of the group art unit. None of these people was willing to listen to reason. Finally, the company filed four affidavits. Two were from medical doctors who treat heart conditions, one was a veterinarian who performed the experimental surgery and one was from a professor of communications who specializes in technical and scientific communications. All the doctors stated that the company’s invention was revolutionary, was not at all like the prior art, and likely to lead to tremendous improvements in heart procedures. The professor of communications explained that the patent office’s interpretation of the terms in the patent did not pass the laugh test. Finally, the examiner relented and allowed four of the claims, while citing new prior art against the other claims. This new art was introduced after two years and five responses and one preappeal, which cost the company its start-up capital and lost time.

The human cost to this bureaucratic inefficiency (ineptitude) included the fact that one of the people the company hired to find financing died of a heart attack while waiting on the patent office. The surgeon-inventor’s daughter, who had helped out with the company, died in surgery while waiting on the patent office, and the surgeon had a couple of heart related procedures. If the surgeon could have substituted his invention for the standard treatments, he would not have had to undergo multiple procedures. However, this just scratches the surface of the cost of this bureaucratic nightmare. If this company had received its patent efficiently and timely, it would have created tens of hundreds of jobs and saved the lives of thousands of heart patients and saved millions of dollars spent on medical care.

This is just one example of the problems created by underfunding the patent office and politicizing the patent process. There are hundreds of thousands of these stories – at least ten times as many as the legitimate complaints about frivolous patent lawsuits. These cases are much more damaging to our economy, but the press and open source anarchists have captured all the attention. We need to focus on the real problems with the patent system, which includes underfunding the patent office and a non-objective standard for what is patentable. That is untold story of the Great Patent Debate.